The board at its meeting held on Monday have discussed and approved in principle the raising of capital of the bank through preferential or QIP issue, Allahabad Bank said in a statement.

Funds would be raised in such a manner that the equity shareholding of the Government of India will not go below 52 percent. The government holding in the Kolkata-based banks stood at 58.90 percent at the end of September 2014.

Keeping the huge capital requirement in the mind, the Union Cabinet earlier this month, allowed public sector banks to raise up to Rs 1.60 lakh crore from markets by diluting government holding to 52 percent in phases so as to meet Basel III capital adequacy norms.

Finance Minister Arun Jaitley in the first Budget speech had said: "To be in line with Basel-III norms there is a requirement to infuse Rs 2.40 lakh crore as equity by 2018 in our banks. To meet this huge capital requirement we need to raise additional resources to fulfil this obligation."

While preserving the public ownership, the capital of these banks will be raised by increasing the shareholding of the people in a phased manner through the sale of shares largely through retail to common citizens of this country, he had said. The bank's stock closed at Rs 126, up 1.98 percent, on the BSE.